LNG optimism tempered by uncertain market prices, B.C. geography

Gordon Hamilton, Vancouver Sun02.26.2013

British Columbia Premier Christy Clark talks with Haisla First Nation Chief Ellis Ross before announcing up to $120-million in royalty credits to the LNG industry and providing a $32-million loan to the First Nations Limited Partnership to invest in the pipeline, at the International LNG Conference in Vancouver on Monday.DARRYL DYCK
/ THE CANADIAN PRESS

Federal Minister of Natural Resources Joe Oliver announces approval of a long-term export license to LNG Canada Development Inc. in Vancouver on Monday Feb. 25, 2013. A terminal proposed by the Shell consortium in Kitimat would export liquefied natural gas to Asia. LNG Canada is a joint venture of Shell, Korea Gas Corp., Mitsubishi Corp. and PetroChina International.DARRYL DYCK
/ THE CANADIAN PRESS

Related

Liquefied natural gas projects received a boost Monday from governments, companies and First Nations who all used a Vancouver energy conference to announce steps they are taking to encourage the nascent LNG industry in this province.

The flurry of announcements coincided with premier Christy Clark’s labelling of the industry as “the opportunity of a lifetime,” which she is hoping will resonate with voters in the May 14 election.

They included federal cabinet approval of an LNG export permit to Shell Canada’s proposed Kitimat terminal, $120 million in provincial royalty credits to the natural gas industry, a $200 million benefits agreement between pipeline developer Pacific Trails Pipelines and 15 First Nations along the proposed route, and a $32 million provincial loan to those First Nations.

Already, signs of an energy boom are hitting Kitimat, the terminus for three LNG proposals. Housing sales have doubled, assessments are up 50 per cent, and the community is looking at LNG construction camps that will add 5,000 beds to the city, according to Kitimat administrator Ron Poole.

But unsettled taxation issues, prices that will be dictated by global markets and B.C.’s rugged geography tempered optimism that B.C. is on the verge of becoming the next Australia, a world-leading LNG exporter.

Clark, who spoke twice at the conference, titled Fuelling the Future, said the government needs to make decisions now if LNG is to provide a new provincial revenue stream.

She said later that energy companies have invested $7 billion in just getting to the point where they are today of examining the feasibility of building LNG plants here.

The province is already negotiating with the industry over the rate for a new tax that it intends to impose on LNG, she said.

Those negotiations need to be settled soon, said Mike Culbert, president of Progress Energy Resource Corp., one of the LNG proponents.

“We need government to continue to work with the industry to ensure that we come up with a fiscal regime, whether that be royalties or LNG taxes as has been mentioned. We need to get all of those items in place well in advance,” he said.

Despite the enthusiasm over LNG, the conference provided a needed wakeup call that Canada is facing tough global competition and it needs to provide an attractive business environment.

“These are enormous investments, they are global mandates responsive to a global marketplace and people will be making investment decisions of $40 to $50 billion over a 35-year period,” former federal environment minister Jim Prentice, who is now an executive vice-president at the Canadian Imperial Bank of Commerce, said in an interview.

“They are going to want to ensure they have the requisite government supports, first nations support, and they have a royalty regime, a fiscal regime and a regulatory regime that provides as much certainty as possible,”

Price and the challenge of building pipelines across mountain ranges were also mentioned as obstacles to developing the industry. Clark said she bases her LNG optimism on the price differential between depressed North American gas prices and those in Asia.

“Top dollar in Asia now is five times as much (as North America). Maybe it’s four times as much a few years from now. It’s still a lot more benefit for the people of our province,” she said.

But some of those Asian market sent signals the price differential Clark referenced may not hold.

China, one of the major markets in the hoped-for LNG boom, raised the price issue when China National Offshore Oil Corporation executive vice-president Luo Weizhong said B.C. faces competition from conventional gas suppliers like Russia. China has already signed contracts with Russia for the pipeline gas equivalent of 50 million tonnes of LNG, more gas than could be supplied by all of the B.C. LNG projects.

“If LNG is not able to complete with pipeline gas, its role will be marginal,” he said at the conference.

Betsy Spomer, senior vice-president at the BG Group, a world leader in natural gas, said B.C.’s geography poses a challenge not found elsewhere. The energy companies came to B.C. several years ago, looking for the next Australia, she said, referring to that country’s developed natural gas export industry. What they found was a gas resource separated from the Coast by challenging mountain ranges.

“That’s the biggest challenge to the projects and probably why they haven’t been built previously,” she said in an interview. “However, we have convinced ourselves that it is do-able and we have come up with an ingenious way to approach it.”

The BG Group has partnered with Spectra Energy to build a pipeline that will follow northern river valleys to the ocean and then travel south to Prince Rupert, where BG is proposing a liquefaction plant.

Despite the challenges, she said, the advantages of B.C. outweigh the disadvantages.

“The resource is phenomenal,” she said. “Canada could be the next Australia.”

Comments

We encourage all readers to share their views on our articles and blog posts. We are committed to maintaining a lively but civil forum for discussion, so we ask you to avoid personal attacks, and please keep your comments relevant and respectful. If you encounter a comment that is abusive, click the "X" in the upper right corner of the comment box to report spam or abuse. We are using Facebook commenting. Visit our FAQ page for more information.

Share

LNG optimism tempered by uncertain market prices, B.C. geography

Video

Best of Postmedia

Swoop has yet to pick up a single customer, but Canada’s newest ultra-low-cost carrier is already talking about expanding into a market that is just taking off. Launched by WestJet Airlines Ltd., Calgary-based Swoop started booking customers this month for flights that begin this summer connecting five Canadian cities. It is offering discounted fares on […]

Director Ryan Coogler admits he was surprised by the initial feedback he got from the bigwigs at Marvel Studios when he began sharing his vision for its next franchise, Black Panther. After all, he was set to make a $200-million epic blockbuster; a popcorn movie that mixed dazzling special effects, heart-stopping action sequences and sprawling […]

At the 1988 Winter Olympics in Calgary, Mary Ormsby of the Toronto Star took one look at the fit, spandex-laden forms of the cross-country skiers and declared: “I have found my new sport.” Ormsby wasn’t a typical out-of-shape scribe. She had been an all-American volleyball player at Ohio State, so knew athletics from both sides. […]

Almost Done!

Postmedia wants to improve your reading experience as well as share the best deals and promotions from our advertisers with you. The information below will be used to optimize the content and make ads across the network more relevant to you. You can always change the information you share with us by editing your profile.

By clicking "Create Account", I hearby grant permission to Postmedia to use my account information to create my account.

I also accept and agree to be bound by Postmedia's Terms and Conditions with respect to my use of the Site and I have read and understand Postmedia's Privacy Statement. I consent to the collection, use, maintenance, and disclosure of my information in accordance with the Postmedia's Privacy Policy.

Postmedia wants to improve your reading experience as well as share the best deals and promotions from our advertisers with you. The information below will be used to optimize the content and make ads across the network more relevant to you. You can always change the information you share with us by editing your profile.

By clicking "Create Account", I hearby grant permission to Postmedia to use my account information to create my account.

I also accept and agree to be bound by Postmedia's Terms and Conditions with respect to my use of the Site and I have read and understand Postmedia's Privacy Statement. I consent to the collection, use, maintenance, and disclosure of my information in accordance with the Postmedia's Privacy Policy.